According to the Social Security Administration, 33 percent of Americans’ retirement income comes from Social Security. The percent of an individual’s retirement coming from Social Security is a big variable, with 50 percent of married retirees and 70 percent of unmarried retirees receiving over half of their income from Social Security. Additionally, 21 percent of married retirees and 45 percent of unmarried retirees rely on Social Security for over 90 percent of their income.
Human life expectancies have been continuing to increase by about two years each decade. Research conducted by the World Health Organization in conjunction with Imperial College indicates that there is no slowing in this trend. People planning for retirement should expect this trend to continue over their lifetimes and plan on average life expectancy increasing by about two years each decade.
To address increasing longevity, retirees should consider portfolio changes that increase assets or income later in their retirement years. This can be accomplished by increasing allocation to growth investments, increasing allocation to guaranteed incomes such as annuities, or a combination of the two. Switching investments away from growth investments into bonds does not help to address increasing longevity. Retirees often fail to adequately address their needs for later retirement, but should still be conservative with funds for short-term needs when making changes.
With steady inflation of 4 percent, costs will nearly triple in a 28-year period. This means that someone retiring at age 62 could need three times as much income at 90 to pay the same bills. Looking at it another way: A retiree’s income at age 90 would purchase one-third of what the same amount did when she was age 62.
The only income sources you can’t outlive are pensions and annuities, and a pension is just a form of an annuity. Of the choices listed for this question, the only one that provides a source of income you can’t outlive is an annuity. Other investments can be used to purchase annuities, but don’t provide guaranteed lifetime income themselves.
According to the latest Aegon Retirement Readiness Survey, the largest retirement fear of Americans is running out of money, a fear selected by 52 percent of respondents. The second-largest fear of Americans in retirement is declining physical health, which was selected by 44 percent of the survey respondents.